3 across Canada and United States embraced contingency fees asan appropriate Definitions Champerty A bargain by a stranger with a party to a suit, by which such third person undertakes to carry on litigation at his own cost and risk, in consideration of receiving, if successful, a part of proceeds or subject sought to be recovered. Reference: Black's Law Dictionary, 5 th Edition Maintenance An officious inter-meddling in a suit which in no way belongs to one, by maintaining or assisting eir party, with money or orwise, to prosecute or defend it. Reference: Black's Law Dictionary, 5 th Edition Barratry- The offence of frequently exciting and stirring up quarrels in suits, eir at law or orwise. Reference: Black's Law Dictionary, 5 th Edition Historical Review One of worst-kept secrets in Ontario was existence of Retainer Agreements entered into between personal injury Plaintiffs and ir counsel, in which payment of legal fees was dependant on Plaintiff being successful in lawsuit. While not specifically called a "Contingency Fee Agreement", practical reality was that counsel would be paid for ir work, if and only if client succeeded in lawsuit. While or jurisdictions means by which deserving claims could be advanced by competent counsel, Ontario maintained its anachronistic aversion to legalizing contingency fees into 21 st century.

4 own procurement, or by ors, and suit m at ir proper costs, for to have part Bergel & Edson v. against maintenance and champerty were introduced Rules 700 years ago in response to abusive interference in over policy considerations. The antipathy of courts to public agreements similarly is supported by policy champertous In se expressions of policy are roots of concerns. justifying present ban on contingent fees. arguments factor in so-called professional life. His function is to visible after injured sufferers, with shameless solicitation, to hustle -2- Going back to late 1800s, champertous agreements were forbidden and considered invalid. The ChampertyAct briefly summed up issue as follows: 1. Champertors be y that move, pleas or suits, or cause to be moved, eir by ir of land in variance, or part of gains; and 2. All champertous agreements are forbidden and invalid. The historical basis for development of this law was summarized by Spiegel J. in WolF: legal system by powerful royal officials and nobles. Although particular abuses against which prohibitions were had been cured by time of Tudors, rules directed to survive. In modern decisions concerning continued courts do not refer to mediaeval origins of maintenance, doctrine, but justify its continued existence on basis of In early 1900s, contingency fees were described in darkest of all possible ways: have gone from bad to worst on this downward grade. Things now "American ambulance chaser" has become a For coach witnesses, interview jurymen, compass in any way a favourable verdict and enjoy some generous shares of 1An act respecting Champerty, R.S.O. 1897, c.327 2Bergel & Edson v. Wolf(2000), 50O.R. 3 rd 777 at parag :aph 22

5 Already in more than one State statutes have been spoils. to put an end, if possible, to such disgraceful practices. passed is well, n, in Ontario to repress beginnings of anything It of this kind of illicit procedure. To this end think savouring settlement or judgment. Lawyers tended, refore, to describe ir retainer in language that since you are injured and no longer working, recognize are probably not in a position to fund this lawsuit. As long you that you will receive compensation for your claims, believe prepared to wait until end of process for payment am my legal fees. Because you are hurt and cannot work, will of require a monetary retainer upfront (or will only require a not renderinginterim accounts to you. party, which will be your responsibility to pay. am losing to wait until conclusion of your case so that you prepared pay me outstanding legal fees and any outstanding can from amount that would orwise be disbursements Neir he contingency fee percentage nor terms of this agreement would offend anyone today. -3- circumstances of case should be investigated and that with by Law Society upon notice to solicitor. 3 dealt Before legalization of contingency fees, lawyers were clearly unable to enter into an agreement with a client in which ultimate fee was wholly contingent upon a successful that, while essentially meaning same thing, did not offend rule against entering into Contingency Fee Agreements. Typically, a lawyer acting for a person injury client would say something like this: as modest monetary retainer), and do not have an intention of Ultimately, assuming that you are successful in this lawsuit, at-fault parties (and/or insurers) will be responsible for paying for a portion of ir legal fees and majority of disbursements that have your been incurred, on top of any amount that is paid for damages and interest. Unfortunately, our system does not require m pay for your entire legal bill, and so you will be left with an to in excess of amount that might be paid by amount, received by you for your own damages and interest. You Solicitor (1907), 14 O.L.R. 464 (Ch.) In this case, solicitor entered into an agreement with 3Re client in which solicitor was to receive 25% of any judgment recovered in a personal injury action.

6 probably would like a rough estimate of amount of money hope can be paid, or be paid, by Defendant. As an estimate, and only as an will would anticipate that amount that you yourself estimate, have to pay would range.somewhere in would of 15% of your ultimate recovery. can tell you neighbourhood certainty to you, my legal account will not exceed 20% some 25%, or such or percentage as might be appropriate to (or individual case) of amount that you recover for your and interest, which, of course, will be on top of damages of your damages for yourself personally, not me. You majority always be able to measure what you are likely to be left will money that losing party pays for costs, less that more will be required to pay, which is reason why what you described for you is simply an estimate. Similarly, have your actual settlement/judgment, less your share of larger legal fees is likely to be as a proportion of total Assuming that this arrangement is comfortable for damages. Many lawyers also got in habit of explaining that y did keep a With this type of arrangement in place, that one might properly describe as a quasi clients were additionally told that, if ir case failed, or ir result was less than expected, -4- that you might be expected to pay for your share of legal fees, over and above amount that that, regardless of amount of legal fees, in order to provide of costs paid directly to my firm by losing party. portion this way, you will always know that you will be recovering In with, when reviewing or considering any offer. Obviously, you, would like to proceed on your behalf. record of time that y were expending on file,.but that ultimate legal bill would reflect a variety of factors, in addition to time that had been expended. Contingency Fee Agreement, re were, of course, variations on me, but generally clients understood that y would not be expected to pay anything until conclusion of case and that lawyer acting on ir behalf would not charge more than a certain maximum percentage of overall recovery for legal fees as an upper cap. Many

7 conducting a solicitor and client assessment. To this day, Cohen v. Kealey remains one results achieved; -5- y would still be expected to pay something for legal fees, but that this amount would be adjusted downwards to reflect poorer than anticipated outcome, and probably client's inability to pay. The ultimate obligation for some responsibility for fees and/or disbursements took arrangement outside of pure contingeht fee and also made client somewhat more of a stakeholder in risk being borne. The fact that a legal account is more than a pure multiplication of number of hours docketed to file times applicable hourly rate was recognized by Ontario Court of Appeal at least as early as In Cohen v. Kealey & Blaney, Ontario Court of Appeal affirmed a list of tacts properly considered by an assessment officer when of leading Case authorities on solicitor and client costs. The factors to be considered were enumerated as follows: time expended by solicitor; legal complexity of matters to be dealt with; degree of responsibility assumed by solicitor; issue; monetary value of matters in importance of matter to client; f. degree of skill and competence demonstrated by solicitor; g. h. and ability of client to pay; ' Cohen v. Kealey & Blaney (1985), 26 C.P.C. (2d) 211 at page 215

8 for an injured infant. The Plaintiffs were successful and costs were awarded on a party some additional fee should be paid. to those of modest means publicly and directly by way services legal aid, rar than privately and indirectly by allowing of fees. A gap, however, remains. Mr. Stribbell is not contingent for legal aid, but at same time Mr. Stribbell does not eligible a sufficient income to permit him to finance this kind of earn think in se circumstances court is entitled to litigation. Justice requires that deserving actions be intervene. by competent counsel and competent counsel are prosecuted to be paid a reasonable fee for value of work entitled The infant Plaintiff is not bound by any pre-existing or done. understanding as to fee entitlement of Plaintiffs' existing It is for that very reason that court is required to counsel. that when entirety of circumstances surrounding think litigation are considered, Plaintiffs' counsel are entitled to this -6- client's expectation as to amount of fee. The factors in Cohen v. Kealeywere reviewed by The Honourable Mr. Justice Osborne in 1990 in Stribbell v. Bhalla. This case arose in context of a medical negligence claim and party basis. The issue arose as to extent to which Plaintiffs' counsel, Earl Cherniak, could recover, on a solicitor and client basis, fees in excess of party and party costs. It was recognized that counsel would have had difficulty in recovering a reasonable fee if action had not been successful. The parents of infant agreed that Justice Osborne stated: that, at least for now, Legislature seems to recognize proceeded on basis of a policy to provide legal have intervene. a fee above party and party costs. Stribbell et al v. Bhalla et al (1990), 73 O.R. (2d) 748

9 informing himself, Justice Osborne specifically considered that result achieved was a factor already recognized by Ontario Court of Appeal as an appropriate consideration. He reviewed Rules of Professional Conduct which also permitted The Winds of Change of "those two leading cases from turn of century". -7 In consideration of result obtained when setting a legal fee. Lastly, he reviewed report of Ontario CourtsEnquiry, 1987, penned by Mr. Justice Zuber, which did not specifically address issue of contingency fees, but which emphasized that inefficiency should not be rewarded. Instead, operative principle ought to be value of work done. Justice Osborne did not think that it would be champertous to receive a fee in excess of assessed party and party costs. The two cases which signalled a change in acceptability of formal Contingency Fee Agreements are probably still fresh in everyone's minds. Mention of se cases in this paper will probably serve more as a helpful reference years down road when someone is reviewing or considering issue of contingency fees and wants to remember. name Mclntyre (Estate) In Mclntyre (Estate) v. Ontario (Attorney General) 6, Ontario Court of Appeal was asked to decide important question of wher lawyers and ir clients are prohibited from 6Mclntyre (Estate) v. Ontario (Attorney General) (2002), 61 O.R. (3d) 257 (C.A.)

10 The action was a claim for wrongful death of Ronald Mclnt re, whose estate was suing husband's estate, entered into a 1. A declaration that Agreement did not offend Champerty Act; -8- entering into Contingency Fee Agreements in relation to civil lawsuits in Ontario. OTLA was represented as interveners on appeal by James Vigmond and Brian Cameron. Imperial Tobacco and Venturi Inc., alleging that y were responsible for his illness and death, given that Mr. Mclntyre died from lung cancer. Mrs. Mclntyre, on behalf of her Contingency Fee Agreement with law firm Rochon, Genova, which Agreement was made conditional upon pre-approval by Court. In event of success, lawyers would be compensated based on a percentage of Rochon, Genova brought an application before Court requesting damages recovered. three declarations: 2. In alternative, a declaration that Champerty Act was of no force and effect and was contrary to Charter;, and 3. In furr alternative, an Order providing a constitutional exemption allowing law firm to be retained, notwithstanding provisions of Champerty Act. Associate Chief Justice of Ontario Court of Appeal O'Connor wrote decision for Court on behalf of Abella J. and MacPherson J. The Court's analysis was divided into five sections:.history of Champerty Act; a. b. The common law of champerty and maintenance; Interpretation of Champerty Act; C.

11 important point to be drawn from recent jurisprudence The that common law regarding contingency fee agreements is begun to evolve so as to conform to widely accepted has public policy norms recognizing significant modern It is not surprising that all courts have not, at circumstances. single point in time, accepted shift in attitude in favour of a types of agreements. The development of common se most often is an evolutionary and incremental process law rar than result of a persuaded that historic rationale for absolute am is no longer justified. The common law of prohibition was developed to protect administration of champerty from abuse, one aspect of which involved protection justice held that contingency fee agreements were per se historically But, as examples from or jurisdictions amply champertous. potential abuses that provided rationale demonstrate, per se prohibition of contingency fee agreements can for addressed by an appropriate regulatory scheme governing be conduct of lawyers and amount of lawyers' fees. also of view that advantages to administration am justice from permitting properly regulated contingency fee of of a per se prohibition against contingency fee continuation actually tends to defeat fundamental purpose agreements law of champerty protection of underlying of justice and, in particular, protection of administration -9- d. Lawyers' Contingency Fee Agreements; and eo Application of law to case. Because this case remains a must read for anyone interested in development of contingency fees in Ontario, it is attached to this paper and located at Tab A. Important quotes from case include: advantages in permitting contingency fee agreements in some single defining judgment. of vulnerable litigants.. Within that broad framework, courts in form of increased access to justice are agreements Indeed, re is a strong case to be made that compelling.

12 litigants. In my view, it is no longer necessary or vulnerable to deem contingency fee agreements per se desirable Neir contingent nature of a fee champertous. nor fact that lawyer's fees may be paid agreement, to lawyer in event of success. One of paid policies in forming common law of champerty originating protection of vulnerable litigants. A fee agreement was so over-compensates a lawyer such that it is unreasonable that unfair to client is an agreement with an improper or i.e., taking advantage of ciient. See Thai purpose supra, at 788, 790. The applications judge in this Trading, dealt with this concern as follows, at 157: case Act for assessing lawyers' accounts will apply. When Solicitors a contingency fee arrangement, courts should assessing by looking at usual factors that are considered in start appropriateness of lawyer-client accounts. See addressing Cohen v. without guarantee of payment. This is, of course, acting discussion becomes controversial. Some argue that where -10- recovery in an action, without more, ought to from an.improper motive or officious intermeddling for constitute purposes of law of champerty. When considering propriety of motive of a lawyer who into a contingency fee agreement, a court will be enters with nature and amount of fees to be concerned suggested compensation may or may not be The and reasonable, depending upon fair outcome of litigation in light of difficulty of case, as well as time and.expenses Counsel should be well rewarded if incurred. is successful, for assuming risk and litigation of litigation. The compensation costs however should not be a windfall resembling a lottery win. of course, does not have. legislation specifically Ontario, a regulating non-class action contingency fee directed agreements. Until such legislation is passed, regime in Kealey & Blaney (1985), 10 O.A.C. 344 at 346 (C.A.) addition, see no reason why courts should not also In compensation to.a lawyer for risk assumed in consider a lawyer to be compensated for risk assumed allowing concerns about abuses that historically increases

13 of champerty aimed to prevent. However, do not think law that needs to be case. The emphasis here should be that reasonableness and fairness of compensation to on lawyer for assuming risk. Many jurisdictions that have approved contingency fee agreements have set out expressly criteria for addressing amount of compensation that will compensation is often acceptance of risk and an to of level of risk involved. assessment want to sound a note of caution about potential in a comprehensive and co-ordinated manner. agreements are obvious advantages to having a regulatory scheme There is clearly and specifically addressed in a single legislative that There is no reason why Ontario, like all or enactment. permitted. Indeed, Ontario has done so in Class be Act In se instances, one element giving rise Proceedings That said, unrea.sonable large contingency fees. It is critical that for fee agreements be regulated and that amount contingency of fees be properly controlled. Courts should be concerned excessive fee arrangements may encourage types of that that historically underlay common law prohibition abuses contingency fee agreements and that y can create against unfortunate public perception that litigation is being more for benefit of lawyers than for ir clients. conducted to clients must always be a paramount consideration. Fairness my conclusion that contingency fee Notwithstanding should no longer be absolutely prohibited at agreements common law, urge government of Ontario to accept that it has been given for many years to enact advice permitting and regulating contingency fee legislation in Canada, should not enact such a scheme. jurisdictions wish to make clear that this comment is not intended Again, to apply to family law matters, where different factors apply. Raphael Partners v. Lam 7 The second case to come before Ontario Court of Appeal dealing with Contingency Fee Agreements related to enforceability of a Contingency Fee Agreement where ZRaphael Partners v. Lam (2002), 61 O.R. (3d)417 (C.A.)

14 letter is to summarize understanding that we have This relating to fees and disbursements (i.e. expenses). reached will be charged in connection with lawsuit arising out that injuries that you suffered at a Judo practice on of that my fees and disbursements will be recovered expect amount paid out by defendants (i.e. wrong- from following settlement or Judgment. My firm will receive doers) more than: no (15) percent of first $1,000, recovered Fifteen account of damages and prejudgment interest; on (10) percent of each $1,000, or portion Ten that is recovered on account of damages and reof interest in addition to first prejudgment and $1,000,000.00; The amount paid by defendants (i.e. your Uncle Daniel, your Aunt Angela and your mor gave example. The example that gave included a hypotical an -12- client, after successful resolution of claim, complained about quantum of fees that were to be paid, even though those fees were in complete accord with terms of agreement reached between client and counsel. The specific question on appeal was wher contingency fee. arrangement entered into between parties was enforceable under Solicitors Act. In this case, following meeting between counsel and client, client received a letter from his solicitors outlining fact that solicitors would represent client, Mr. Lam, on a contingency fee basis. That letter provided as follows: September 25, 1996, at University of Windsor. wrong-doers) in addition to damages and interest, by way of "costs". $3,000, on account of damages and prejudgment

15 by way of settlement or Judgment, plus an additional interest paid by way of "costs". In that hypotical fact $150, no more than $500, (i.e. of first $1,000, received by way of settlement 15% Judgment toger with no more than 10%. of each or "costs". My firm will be entitled to that amount, as well. If of amount awarded by way of "costs" is not sufficient to fully my firm's fees and disbursements, we will not seek cover in addition to amounts referred to in paragraphs anything Ultimately, Mr Lam's claim settled at a ' Party and party costs $200, Disbursements $50, was represented at mediation and agreed to take OHIP for its subrogated claim, and also agreed to pay $253, situation, our fees would be calculated as per items 1 & 2 above, plus $350, awarded for "costs", namely $150,000.00). amount Ontario, a lawyer is entitled to charge fees based on time In complexity of case, lawyer's expertise, importance spent, to client, and or relative factors. agree, as indicated that my fees will not exceed amounts referred to in above, 1,2 & 3 above. Again, my firm will receive no more than items or portion reof, paid out in addition to $1,000,000.00, $1,000, by way of damages and interest. In first addition, expect that re will be an amount awarded by way 1,2 and 3 above. [Emphasis in original.] mediation on following basis: General damages $2.5 million dollars solicitors $44, as its contribution towards legal fees. Mr. Lam provided written instructions confirming that he was to recover approximately $2,000, after payment to OHIP and after payment of legal expenses. Fees, inclusive of GST and disbursements, were to total $500,

16 -14- On appeal, it is important to note that re was no challenge made with respect to legality of a contingency fee arrangement that was entered into back in It was not alleged that agreement was champertous or that solicitors had an improper motive in entering into arrangement. Therefore, on appeal, no issue arose concerning public policy implications of fee arrangement, or more generally legal status of contingency fee arrangements in Ontario. Instead, appeal looked at Solicitors Act and its application to this particular fee agreement. In looking at appropriateness of fee agreement, Court made a number of observations'. The contingency feearrangement was explained in detail to Mr. Lam and included a hypotical illustration of manner in which fees would be calculated. The arrangement was confirmed in writing. At mediation, Mr. Lam signed written instructions confirming his agreement that his solicitor receive maximum fees contemplated under ir contingency fee arrangement. Mr. Lam did not object to contingency fee arrangement for more than three and a half years, during life of file, and no objection was communicated until after a settlement of action had been negotiated and accepted, and after written instructions had already been received permitting fees to be paid. Ultimately, Court concluded that, in circumstances, agreement was not unfair to Mr. Lam. It was a bargain freely made, understood and accepted by him.

17 come up with guidelines and regulations. Ontario's New Contingency Fee Regime 1. So/icitors Act, R.S.O. 1990, c.$. 15, as amended (Tab B); -15- The Court noted that contingency-like fees approach has been condoned by Courts for several years, particularly in negligence claims, and referred itself to Mclntyre (Estate) v: Ontario in affirming that Court had already recognized advantages to administration of justice in form of increased access to justice from properly regulated Contingency Fee Agreements. These two decisions from Ontario Court of Appeal, released over back-to-back months in Spring of 2002, ushered in winds of change. Contingent.fee agreements had been recognized by Ontario's highest Court, forcing a response by government to No analysis or review of contingency fees in Ontario is complete without reference to following key authorities: 2. Ontario Regulation l 95/O4, entitled Contingency Fee Agreements, enacted pursuant to So/icitors Act (Tab C); and 3. The Ru/es of Professiona/ Conduct, Rule 2.08, dealing with fees and disbursements (Tab D). Each of se authorities is attached to this paper for future reference.

18 Section 28.1, which provides that a solicitor may enter into a Contingency Fee Agreement client is contingent, eir in whole or in part, on successful disposition or completion or any or criminal or quasi criminal proceeding, nor for a family law matter. 9 8Section 28.1 (1).and (i) of Solicitors Act 9Section 28.1 (3) of Solicitors Act 1 Section 28.1 (8) of Solicitors Act -16- Solicitors Act The Solicitors Act was amended effective October 1,2004 by addition of a new section, with a client, in accordance with terms of Section Such an Agreement may provide that remuneration paid to solicitor for legal services provided to of matter. 8 Contingency fees are not permitted in Ontario for any proceeding under Criminal Code In my view, one of unfortunate additions to contingency fee provisions of Solicitors Act relates to fact that Contingency Fee Agreements shall not include, in fee payable to solicitor, any amount that is to be paid for partial indemnity costs or substantial indemnity costs, unless solicitor and client jointly apply to a Judge of Superior Court of Justice for approval of inclusion of costs in Contingency Fee Agreement, owing to some exceptional circumstance, and unless Judge is satisfied that exceptional circumstances apply and approves inclusion of costs, or a proportion of m, in fee payable to solicitor. 1

19 A detailed ten-section Regulation was enacted under Solicitors Act, which has provided -17- This stands in stark contrast to longstanding practice adopted by personal injury lawyers across province who have explained to ir clients that losing party will be obliged to pay a portion of legal fees and that, in addition to this amount, client will have to pay an additional sum representing balance of legal bill owing, which is often estimated in terms of a percentage amount over and above costs contribution made by losing party. believe that re are many lawyers in province who now describe ir retainer as a contingency fee arrangement, but who continue to talk in terms of receiving "party and party costs", plus an additional amount. On a strict reading of Solicitors Act, such an Agreement is not a valid contingency fee, unless approved by Court on basis of some exceptional circumstances. Like or forms of retainers, a Contingency Fee Agreement still remains subject to an assessment under Solicitors Act. The client may apply to Superior Court of Justice for an assessment of solicitor's bill, within 30 days after its delivery, or within one year after its payment. 11 Contingency Fee Regulation very rigid requirements that must be followed for a valid and enforceable Contingency Fee Agreement. -11Section 28.1 (11 of Solicitors Act

20 No one should ever enter into a familiar with new regulation. or than by way of a Highlights of some of more important provisions are 2. That client must have been advised that hourly rates may vary among solicitors, 3. The client must state that he or she has chosen to retain solicitor by way of a of costs and disbursements; -18- Contingency Fee Agreement without being thoroughly summarized below. The Contingency Fee Agreement must contain following statements: 1. That client and solicitor have discussed options for retaining solicitor, Contingency Fee Agreement, including retaining of solicitor by way of an hourly-rated retainer; and that client can speak with or solicitors to compare rates; Contingency Fee Agreement; 4. The client must state in Agreement that he or she understands that all usual protections and controls on retainers between a solicitor and client apply to Contingency Fee Agreement; 5. Explaining contingency upon which fee is to be paid to solicitor; 6. Setting out method by which fee is to be determined and, if method of determination is as a percentage of amount recovered, a statement that explains that for purpose of calculating fee amount of recovery excludes any amount awarded or agreed to that is separately specified as being in respect 7. A simple example that shows how contingency fee is calculated;

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